Cost Management Techniques, ABC Costing

zintia13

I am not sure what i have done wrong, c

an anyone help me with this?

CornishPixie

You are almost there!

We know that Cleuch spends 3 hours per unit and Lomond takes 2.5 hours per unit. We need to work out the cost per labour hour so 850,000 / 170,000 = £5

Then we know that Cleuch budgeted for 40,000 units and Lomond budgeted for 20,000 units. Simply multiply them by the time taken then multiply again by the hourly rate.

So your calculation for Cleuch will be 3 x 40,000 = 120,000 x 5 = £600,000
And your calculation for Lomond will be 2.5 x 20,000 = 50,000 x 5 = £250,000

zintia13

Thank you!!!

CaitlinK

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Arran

@CornishPixie have you got an idea of how to answer part c? I imagine you just discuss the relevant advantages, disadvantages and implications of abc and even the traditional absorption method.